Sears Canada Inc., Toronto, said it would suspend monthly contributions to the Sears Registered Retirement Plan as part of its bankruptcy restructuring, pending court approval.
The company on Wednesday filed a motion with the Ontario Superior Court of Justice, which had granted Sears Canada creditor protection on June 22, to halt the contributions as well as other cash payments to other benefits, including health, dental and severance, according to court documents.
The pension contribution halt would mean the company would suspend C$3.7 million ($2.8 million) in monthly payments to the pension plan. However, pension benefits would continue to be paid in full since the assets are being held by custodian CIBC Mellon, according to a Sears Canada spokesman.
Sears Canada said the requirements of receiving C$450 million in debtor-in-possession financing force the company to "comply with a budget, which does not provide" for the benefit contributions, court documents said.
The pension plan had C$1.2 billion in assets as of the plan's last valuation date, Dec, 31, 2015, a Sears Canada spokesman said. The plan was 78% funded under solvency, or immediate termination, funding rules but 102% funded under going-concern, or ongoing operation, funding rules, both as of the last valuation date.
A hearing on Sears Canada's motion is scheduled for July 13.